Infrastructure policies and investment

What is infrastructure?

The Economist calls infrastructure the “economic arteries and veins; roads, ports, railways, airports, power lines, pipes and wires that enable people, goods, commodities, water, energy and information to move about efficiently.” Better quality infrastructure allows an economy to be more efficient, improving its productivity, and raising its long-term growth rate and living standards.

Both the public sector and private sector invest in infrastructure. Projects in the energy and utilities sectors are almost entirely privately funded. The opposite is true of projects in the transport and social sectors. Projects may be funded through a mix of public and private funding.

What is the state of UK infrastructure?

According to the World Economic Forum, the UK was ranked 11^th out 141 countries in terms of the overall quality of its infrastructure in 2019.

There is broad consensus that over the past 40 years the UK has under-invested in infrastructure. The UK Government says that “[f]or too long the UK has under-invested in infrastructure…” In 2015 the OECD found that that since the 1980s UK infrastructure has suffered from under-investment, compared with some competitor countries. More recently, the OECD said that the UK government is starting to address the issue. 

What are the Government’s infrastructure plans?

The 2019 Conservative Manifesto pledged an “infrastructure revolution” in the UK. The Government plans to invest in infrastructure to “level up” economic growth and prosperity across the country and to address the challenges posed by climate change.

The Chancellor has set out relatively large increases in government investment spending, which includes infrastructure. Government investment spending is to increase to levels last seen in the late 1970s, when there were more publicly owned industries than now. Such industries required capital investment.

Government’s role in infrastructure isn’t limited to providing funding. For instance, it also directs investment towards projects it considers valuable and supports private investment through various mechanisms.

Alongside Spending Review 2020, the Government:

• published a National Infrastructure Strategy, which includes plans to invest in infrastructure to “level-up” and support decarbonisation and adapt to climate change. It also sets out the Government’s approach to supporting private investment and improving delivery. The Strategy aims to ensure that the long-term goals for infrastructure investment are brought together with the shorter-term goal of supporting economic recovery from the coronavirus pandemic;
• announced that a UK infrastructure bank will be set up to support private investment in infrastructure – further details followed at Spring Budget 2021;
• set multi-year capital programme settlements for some infrastructure projects including High Speed Rail and the Road Investment Strategy.

The National Infrastructure Strategy was partly informed by recommendations made by the National Infrastructure Commission in its National Infrastructure Assessment, which is a comprehensive report on the UK’s long-term infrastructure needs up to 2050. The National Infrastructure Commission provides the Government with impartial, expert advice on the UK’s long-term infrastructure needs.